Across the region, Asian stocks are down the most in two-weeks following the weaker-than-expected existing home sales data overnight. Energy stocks across the region are among the biggest losers. The Nikkei 225 is the worst performer, down 1.9%. The Hang Seng, Shanghai Composite and Kospi are all lower between 0.3% and 1.3%.

In Australia, the ASX 200 finished 1.6% weaker at 4486.1, right on its session lows. Losses for the day were broad based with the heavyweight materials, financial, industrials and energy sectors all convincingly lower on concerns that a suspect US housing recovery and stagnant jobs market may be undermining the foundations of the economic recovery.

We're not at all surprised that the foray above 4600 was relatively short lived - since hitting recent lows of 4175, the markets jumped 10.5% in a little over a month, a pretty strong rise in anyone's language. It never one-way traffic so we see this mini-pullback as healthy and completely normal. The same concerns that rattled the market a month ago are still lingering, albeit not with the same severity.

Looking at the bigger picture, the euro is definitely dictating the fortunes of equity markets - the correlation at the moment is quite amazing. The euro is reflecting global sentiment towards Europe, which as we know has been the story of the first half of the year.

Unfortunately, we don't see things changing too much over coming months as European and US trading desks approach their traditionally quite summer months. Hence, we see a fairly bland, range bound market over these months before an increase in activity during the last quarter.

The energy sector was the day's worst performer falling 2.2% with sentiment towards the sector, particularly in the US, continuing to be profoundly negative. This comes despite a US Federal judge overturning the 6 month ban placed on deepwater drilling by the Obama Administration. Major energy names Woodside Petroleum, Oil Search, Caltex and Santos all closed weaker between 1.4% and 3%.

Woodside Petroleum today flagged a possible timetable delay and cost increases at its important $13 billion Pluto LNG development in Western Australia. A dozen crane and forklift workers have been on strike over pay conditions since April 28, with Woodside saying its first LNG target could be missed if action continues. Construction workers have already gone on strike twice at Pluto since late 2009 over the accommodation dispute and Woodside in November hiked the project's cost estimate by 6 - 10%. Pluto's foundation train has the potential to more than double Woodside's LNG output to around 6.4 million metric tons a year and any delay would be met harshly by investors, potentially causing reliability concerns with LNG customers.

There was a fair bit of selling amongst the banks today, with the financial sector losing 2.1%. There's some noise doing the rounds on the street that overseas institutions are selling Australian banks on concerns over a potential housing market bubble. There's solid arguments both ways for the local housing market, but we must remember the big four banks are pretty heavily exposed to the local mortgage market. Whether or not we see a correction in housing prices, the last thing this market needs is fear based selling. Enough fear, and a correction could become self fulfilling.

Macquarie Group and Westpac topped the list of decliners, falling 3.1% and 3.3% for the session. The other three major banks were all weaker between 1.4% and 2.6%.

The materials sector ended the session 1.5% lower despite broadly higher base metal prices overnight and some suggestions the Government may be looking at reconfiguring certain aspects of it proposed resources super profits tax (RSPT). Heavyweight miners BHP Billiton and Rio Tinto closed weaker by 1.3% and 2.2% respectively while Fortescue Metals was down 1.6%. While most of resource space ended in the red, one pocket of strength was the gold sector, with gold prices continuing to benefit from the current global uncertainty. Newcrest Mining and Lihir Gold were higher by 0.8% and 0.5% respectively.

In a resources research note from Goldman Sachs JBWere, it believes fears of a fall in materials demand from the slowing Chinese economy look overstated, creating a buying opportunity for supply-constrained commodities, particularly copper. Reports of property bubbles suggest a gloomy scenario for local construction; although Beijing and Shanghai "punch well above their weight in terms of news flow", inland cities and rural areas are now the main volume drivers for construction-related raw materials demand. In relation to infrastructure, project approvals are likely to slow from the 2009 stimulus boom, but existing projects are in their most materials-intensive phases this year or even in 2011. Therefore, even if China's copper consumption slows to 6% vs 26% in 2009, the broker predicts a tightening global market and rising prices as 2009's OECD demand rebounds. Goldman notes that iron ore prospects are a little less sanguine, since steel is not seen as supply-constrained and China production appears to be outpacing demand.

Elsewhere, the industrial sector suffered as well, closing 1.6% lower as the disappointing home sales data overnight weighed on the likes of James Hardies and Boral. They fell 3.5% and 3.7% while Leighton Holdings and Qantas were down 2.9% and 2.1% respectively.

In stock specific news, Seven Group (-2.9%) today confirmed a Wall Street Journal report that it has applied for up to US$250 million worth of shares in the massive IPO of China Agricultural Bank. It's yet to hear whether its application has been successful. Some may raise their eyebrows at the planned investment from the group, whose investments include media and heavy equipment leasing, but Seven believes the stake would assist its tractor leasing business in China. Seven said the stake, if allocated, will be a strategic investment intended to further Seven's links with and assisting its WesTrac business in northeastern China.

Ben Potter Research Analyst

IG Markets - CFD trading